Economics Chapter 8: The Role of Businesses

Today’s Agenda Put your phones away, earphones out of ears Review Begin Chapter 8 Watch documentary on eBay

At the end of this lesson, you should be able to Define entrepreneurship Define and list pros and cons and cite examples of Proprietorship Partnership Corporation

Let’s Review 1.Economic system characterized by government owning all means of production in a command economy, no competition, no profit with government attempting to create economic equality 2.Economic system characterized by a totalitarian government directing the economy but allowing private ownership of business and profit 3.Economic system characterized by a democratically elected government directing the economy with the purpose of creating economic equality and social justice 4.Economic System characterized by businesses competing with one another in a free market in pursuit of profit 1.Communism 2.National Socialism 3.Democratic socialism 4.Capitalism

What is an entrepreneurship? Process of starting and running a business by offering a new or improved good or service Assumes risks Motive= profit Example Use a pair of jeans that can be sold for thirty dollars and instead turn them into a denim backpack that sells for fifty dollars Larry Page and Sergey Brin, the entrepreneurs of Google

What makes a successful Entrepreneurship? Requirements Marketable idea Good or service must be sellable Potential demand Consumers must be willing and able to buy Technical know-how Must possess knowledge of how to produce the good or service Financial resources Fixed cost to start up business can be high Venture capitalist An investor who helps finance a new business in exchange for a share of the profits Google's first production server.

What is a Sole Proprietorship? Business owned by one person Most common form of business Examples: family farms, barbershop, restaurants, home remodeling Advantages Easy to form Owner retains all profit Makes all decisions Disadvantages Unlimited liability Responsible for all unpaid bills, lawsuits, debts Limited capital Limit on amount of money available to grow business Unlimited responsibility Limited life -Business ends when proprietor stops The eBay concept was launched by Pierre Omidyar in response to difficulties his girlfriend encountered when she was trying to sell old Pez dispensers and other collectibles. Omidyar knew there was a huge community of people interested in selling used merchandise, and the Internet seemed like the logical place to bring them together. Using his personal webpage, he started a sole proprietorship with a prototype called Auction Web in In a short period of time, the company was incorporated and the name changed to eBay. eBay went public in but just three years earlier, it was a small, sole proprietorship.

Today’s Agenda Finish Chapter 8 slide Show Answer questions 1-5 on page 152 in textbook in complete sentences (For Points)

Let’s Review 1.What are some characteristics of capitalism? 2.Process of starting and running a business by offering a new or improved good or service 3.Term for an investor who helps finance a new business in exchange for a share of the profits 4.What is a sole proprietorship? 5.List 2 advantages of proprietorship. 6.List 2 disadvantages of proprietorship. 1.businesses competing with one another, in a free market (laissez- faire) in pursuit of profit 2.Entrepreneurship 3.Venture capitalist 4.Business owned by 1 person 5.Own Boss, collect all profit 6.Unlimited liability, limited capital, assume all responsibility

What is a Partnership? Business owned by 2 or more people Created by contract Legally binding document that specifies terms of partnership Examples: Law firm, Medical practice, construction business, musical groups Advantage Easy to start Allows for sharing of finances, knowledge, responsibilities and liabilities between partners Disadvantages Unlimited liability All debt, lawsuits, unpaid bills Decision making must be shared Limited Life Business ends with breakup of partnership Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz and Chris Hughes. Play from 11:00-18:08 Also, limited capital

What is a Corporation? Business owned by many shareholders Stock- legal document indicating a share in ownership Purchased on NYSE, Chicago, online, etc. Has same legal rights as person Own and sell property, make contracts, sue in court Many began as proprietorships, partnerships Examples Google, Facebook, GM

What are the Advantages of Corporations? Advantages Limited liability Investors only risk stocks they’ve purchased Shareholders private property cannot be taken “Ltd.” often added to company name means “Limited” Large pool of capital Corporation can sell more stock or bonds Bonds Type of loan repaid within specified time with interest Unlimited Life Company does not end with death of investor Ownership easily transferable

What are the disadvantages of Corporations? Disadvantages Expensive and complicated to start Charter Legal document granting permission to start corporation by state government Financial records must be open to public and accurate Prospectus Report of corporations that must show potential investor accurate and honest finances of company Taxed Twice Pay income taxes on profits and on dividends Dividends- Investors share of the profits

Homework Read page 152 in textbook and answer questions 1-5 in complete sentences